Article Published by Terra Global Founder, CEO “Fueling Climate Finance in Colombia”

Terra Global Capital
November, 2017

As part of Colombia’s tax reform in 2016, the country added a new fuel tax to encourage compliance with their greenhouse gas mitigation goals. The level of the tax is based on the carbon content of fuels, and includes all petroleum products and all types of fossil gas used for energy purposes, provided that they are used for combustion (other than coal). The details of the tax are covered under Decreto 926 de 2017, which went into effect on 1 June 2017. The tax rate is initially COP$15,000 (USD$5) per tonne of CO2, and will be adjusted each year on 1 February based on the previous year’s inflation plus one percentage point.

The provisions of the law are clearly intended to stimulate implementation of mitigation activities that generate emissions reductions/removals that can be used in exchange for payment of the tax. The ability to use emission reductions/removals for tax compliance provides taxable entities the opportunity to reduce the costs compliance and creates demand for emission reductions.

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